Markets assess if US action against Iran to be quick and relatively painless or else escalate

General trend and developments

-Brent Oil roughly 8-10% higher at ~$80 and WTI Crude +6-7% at $71-72, higher, but still within trading ranges seen last year. As the session continued, oil gave back up to half of its opening gains, settling below the opening peak.

- Stocks were not untowardly affected, (worst was Nikkei -1.6% and Hang Seng -1.7%, US equity FUTs -0.7% to -0.9%)) with increases in shipping, energy stocks helping to balance out falls in airlines and financials (Qantas -10%) . Equities continued to improve during the session following comments from Iran’s Security Chief that Iran is seeking nuclear talks with the US. However, he later contradicted himself a few hours later saying there will be no negotiations with the US, however, the market ignored these later comments.

- Currencies AUD, EUR, GBP opened down ~1%, but clawed back half or in the case of the Aussie dollar, nearly all of its opening losses.

-Analysts focus on possible shipping alternatives to Hormuz.

-The operation itself has seen Supreme Leader Khameni killed along with ~40 top officials and military commanders. Iran mobile missile launchers and remaining troops appear to be operating independently, with communications cut off.

-Financial markets reduce bets related to May RBA rate hike, with Aussie 10-years -6bps.

-Global Feb Mfg PMIs today, with Taiwan registering a 4 handle improvement on the back of surging chip output for export.

-Japanese yield curve also down around 2bps amid safe haven flows.

-BOJ’s Himino appeared in no hurry to raise rates, saying the BOJ's policy remains somewhat accommodative, though should gradually shift to a more neutral stance through moderate policy rate hikes.

-China EV companies reported Feb sales over the weekend: Xpeng -4%, NIO -3% Geely -3% Xiaomi -3%.

- OPEC confirmed to increase oil production by 206K bpd, starting April, 2026, exceeding analyst expectations, of ~137K bpd.

-Shares of Alibaba -4% after cautious comments on the company from Goldman Sachs.

-In US M&A news late Friday the Ellison-backed Paramount (+25%, incl after-hours Fri) bid for Warner Brothers (-2%) finally beat off Netflix’s advances (+13%), which withdrew from the bidding. Regulatory approval looks likely. A large number of WBD assets (e.g. CNN) likely to be added to Paramount’s own assets (e.g. CBS), all to be owned by a right-leaning owner and likely more movie and TV content to be produced in the future to appeal to “Middle America.”

-Chances of a hold for the Fed in March rose another 3 points today to ~95.6%.

-US equity FUTs -0.8% to -1.0% during Asia trading.

Looking ahead (Asian-weighted focus, using Asian time zone)

- Mon Mar 2nd Global Feb Mfg PMIs (Mon night US Feb ISM Mfg).

-Tue Mar 3rd JP Q4 Capital Spending, BOJ Gov Ueda Speech, AU Q4 GDP, (Tue night EU Feb CPI, UK Spring Statement).

- Wed Mar 4th AU GDP, CN RatingDog/NBS Mfng PMIs.

-Thur Mar 5th AU Jan Trade Balance,.

- Fri Mar 6th EU GDP, (Fri Night US Jan Retail Sales, US Feb Non-Farm Payrolls).

Holidays in Asia this week

-Mon Mar 2nd South Korea.

-Tue Mar 3rd India, Thailand.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.8% at 9,125.

-Australia Feb Final PMI Manufacturing: 51.0 v 51.5 prelim (confirms 4th month of expansion).

-Australia Q4 Inventories Q/Q: -0.1% v -0.8% prior.

-Australia Feb ANZ-Indeed Job Advertisements M/M: 3.2% v 4.4% prior.

-Australia Jan Melbourne Institute Inflation M/M: -0.2% v +0.2% prior; Y/Y: 3.6% v 3.6% prior.

-Airlines trade lower as oil prices have spiked on Iran: Virgin Australia -3.5%; Qantas -10.3%.

-Financial markets reduce bets related to May RBA rate hike – US financial press.

-New Zealand Dec Filled Jobs M/M: +0.2% v -0.3% prior.

China/Hong Kong

- Hang Seng opens -1.2% at 26,305; Shanghai Composite opens -0.3% at 4,151.

-China warns citizens against travelling to Iran; Urges citizens in Iran to evacuate as soon as possible - press.

-China MOFCOM: Scraps tariffs on some Canadian imports, effective from Mar 1st until end-2026.

-China: Urges the UK to withdraw sanctions on Chinese entities; will take necessary measures to safeguard rights.

-Macau Feb Casino Revs (MOP): 20.6B, +4.5% y/y.

-China PBOC sets Yuan reference rate: 6.9236 v 6.9228 prior.

-China PBOC Open Market Operation (OMO): Injects CNY19.0B in 7-day Reverse Repos; Net Injects CNY19.0B.

Japan

-Nikkei 225 opens -1.5% at 7,951.

-Japan Feb Final PMI Manufacturing: 53.0 v 52.8 prelim (confirms 2nd straight expansion).

- Japan Govt: No decision yet made on releasing energy stockpiles - financial press.

- Bank of Japan (BOJ) Dep Gov Himino: To raise rate if economic outlook is met - speech in Wakayama.

-Japan PM Takaichi: Unchanged on stance Iran cannot have nuclear weapons.

Korea

Kospi closed for holiday.

-South Korea Feb Trade Balance: $15.5B v $11.4Be - update.

Other Asia

-Malaysia Feb PMI Manufacturing: 49.3 v 50.2 prior (1 contraction in 4 months).

-Vietnam Feb PMI Manufacturing: 54.3 v 52.5 prior (8th month of expansion).

-Taiwan Jan PMI Manufacturing: 55.2 v 51.7 prior (3rd month of expansion).

-Philippines Feb PMI Manufacturing: 54.6 v 52.9 prior (3rd month of expansion).

-Thailand Feb PMI Manufacturing: 53.5 v 52.7 prior (10th month of expansion).

- Indonesia Feb PMI Manufacturing: 53.8 v 52.6 prior (7th month of expansion)..

North America

-FedEx: Customers may experience service delays due to Mid-East developments - statement.

- *(US) US SAID TO BE PARTICIPATING IN ISRAELI STRIKES ON IRAN; US STRIKES ON IRAN UNDERWAY; EXPLOSIONS HEARD TEHRAN; IRAN SUPREME LEADER [weekend update].

- *(IR) IRAN OFFICIAL: IRAN PREPARING FOR RETALIATION; AIMS 'CRASHING RESPONSE' TO ISRAEL [weekend update].

- Nvidia: *SAID TO BE PREPARING A SPECIALIZED CHIP IN BID TO SPEED AI PROCESSING; SAID TO BE A NEW SYSTEM FOR "INFERENCE COMPUTING"; SET TO BE RELEASED IN MARCH 2026 - WSJ [weekend update].

- *(US) PRES TRUMP: CONFIRMS BEGAN "MAJOR" COMBAT OPERATIONS IN IRAN; OUR OBJECTIVE IS TO ELIMINATE THREATS FROM IRAN REGIME; WE ARE NOT GOING TO PUT UP WITH IRAN ACTIONS ANY LONGER - TRUTH SOCIAL VIDEO ADDRESS [weekend update].

-*US Sec Def Hegseth: Confirms Pentagon has declared Anthropic a supply-chain risk - X post [**Note: "Supply chain risk" label was never applied to an American company before] [late Fri update].

Europe

*(IR) Iran Security Chief Larijani: We will not negotiate with the US.

-(IR) Iran Security Chief Larijani: Seeks nuclear talks with the US - financial press.

-*(IR) TANKERTRACKERS.COM: BI-DIRECTIONAL STRAIT OF HORMUZ TRAFFIC IS STILL IN MOTION. 2026-02-28 (16:07 GMT).

-OPEC confirmed to increase oil production by 206K bpd, starting April, 2026, exceeding analyst expectations, of 137K bpd. [weekend update]

-BRENT CRUDE FUTS OPEN +13% AT $82/BBL

*(IR) EU ASPIDES OFFICIAL: IRGC CLOSING STRAIT OF HORMUZ [**TTN Note: Roughly one-third of all seaborne crude (~ 20Mbpd) threads a 34-km Strait of Hormuz] [weekend update].

- *(IR) UNVERIFIED ISRAELI PRESS REPORTS THAT THERE ARE “GROWING INDICATIONS” IRAN SUPREME LEADER KHAMENEI WAS LIKELY KILLED; CHANCES THAT HE IS OUT AS SUPREME LEADER SHARPLY JUMPED ON POLYMARKET IN LAST HOURS [weekend update].

-*(RU) RUSSIA SAID TO CONSIDER HALT IN PEACE TALKS UNLESS UKRAINE CEDES LAND - FINANCIAL PRESS [weekend update].

Levels as of 00:20 ET

Nikkei 225 -1.6%; ASX 200 flat; Hang Seng -1.7%; Shanghai Composite +0.6%; Kospi closed.

Equity S&P500 Futures -0.9%; Nasdaq100 -1.0%; DAX -1.6% FTSE100 -0.7%.

EUR 1.1756-1.1796; JPY 156.02-156.81; AUD 0.7037-0.7117; NZD 0.5949-0.5995.

Gold +1.3% at $5,346/oz; BTC -0.9% at $66,802, Crude Oil +6.4% at $71.29/bbl; Copper -0.3% at $6.0433/lb.